WASHINGTON — The Coalition for a Prosperous America (CPA) today released a statement regarding closed door negotiations in the Organization for Cooperation and Economic Development (OECD) on how to resolve multinational tax avoidance that plagues the U.S. Treasury and puts U.S. domestic companies at a significant disadvantage to multinational competitors. The negotiations have two separate parts. Pillar One seeks to reallocate some tax revenue from where multinationals book profits to where they have sales. Pillar Two aims to create a global minimum corporate rate. CPA is the leading national, bipartisan organization representing exclusively domestic producers and workers across many sectors of the U.S. economy.
Currently, multinational corporations are spending millions of dollars lobbying Congress to protect their tax avoidance strategies and ensure their effective tax rate does not increase. On October 5, 2021, French Finance Minister Bruno LeMaire insinuated that U.S. negotiators are pushing for a reduced tax burden on multinational corporations under the Pillar 1 negotiations. Meanwhile, the House reconciliation legislation does not sufficiently address the difference in low effective tax rates paid by large multinational companies and the higher tax rates paid by domestic companies. By increasing the statutory corporate tax rate, without appropriate fixes, domestic companies will bear an even greater tax burden compared to multinational companies.
“As the Biden Administration finalizes OECD negotiations, and as Congress seeks to change U.S. corporate tax rates, it is imperative that domestic companies are not put at a disadvantage to multinational corporations,” said Michael Stumo, CEO of CPA. “While stateless multinationals spend millions lobbying Congress and the Biden Administration, CPA and our members are becoming increasingly concerned that the prosperity of U.S. domestic companies and American workers are taking a backseat. Congress and the Biden Administration should embrace this opportunity to implement Sales Factor Apportionment and finally put American companies on the same playing field as their foreign competitors.”
CPA has long called for ending tax avoidance by implementing Sales Factor Apportionment (SFA), which would tax profits based on the location where the product was sold. In July, CPA released a statement after 130 countries and jurisdictions, representing more than 90% of global GDP, joined a statement establishing a new framework for international tax reform that represents a positive step towards eliminating the ability of multinational companies to avoid paying U.S. corporate tax by shifting profits offshore to tax havens.
In April, CPA praised the Biden administration’s Pillar 1 offer to the OECD that would implement a limited SFA for the top 100 multinational corporations. On April 23, CPA urged Senators Ron Wyden (D-OR), Sherrod Brown (D-OH), and Mark Warner (D-VA) to include SFA in their tax framework proposal released earlier this year. In September 2020, CPA published an analysis of the federal corporate tax paid by the S&P 500 companies in 2019 and found they paid on average less than 9% in cash federal tax last year. The analysis also found that by replacing the current corporate tax system with an SFA system at 21 percent, the United States could have expected to earn an additional $97.8 billion in federal corporate tax receipts for 2019.
On April 6, CPA Tax Policy Director David Morse published an op-ed calling on Congress to “no longer allow multinationals to employ convoluted profit calculations—or claim residence in an obscure, offshore location—as a means to skirt U.S. tax obligations.” In November 2019, CPA urged the OECD to support a move to sales factor apportionment (SFA) as part of its comprehensive review of international corporate tax systems.